UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
for the quarterly period ended July 31, 1998.
[ ] Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number 1-4003
DRESSER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware C 75-0813641
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P. O. Box 718
2001 Ross 75221 (P. O. Box)
Dallas, Texas 75201
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code -- 214-740-6000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at August 31, 1998
Common Stock, par value $.25 175,931,500
INDEX
Page
Number
Part I. Financial Information
Management's Representation 3
Condensed Consolidated Statements of Earnings
for the three months and nine months ended
July 31, 1998 and 1997 4
Condensed Consolidated Balance Sheets
as of July 31, 1998 and October 31, 1997 5
Condensed Consolidated Statements of Cash Flows
for the nine months ended July 31, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
Part II. Other Information
Legal Proceedings 15
Changes in Securities 15
Submission of Matters to a Vote of Security Holders 16
Exhibits and Reports on Form 8-K 16
Signature 16
Exhibit Index
Exhibit 27 Financial Data Schedule
MANAGEMENT'S REPRESENTATION
The condensed consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The Company
believes that the disclosures are adequate to make the information
presented not misleading. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements, the notes to consolidated financial statements and management's
discussion and analysis included in the Company's 1997 Annual Report on
Form 10-K.
In the opinion of the Company, all adjustments have been included that were
necessary to present fairly the financial position of Dresser Industries,
Inc. and subsidiaries as of July 31, 1998 and October 31, 1997, the results
of operations for the three months and nine months ended July 31, 1998 and
1997, and cash flows for the nine months ended July 31, 1998 and 1997.
These adjustments consisted of normal recurring adjustments. The results
of operations for such interim periods do not necessarily indicate the
results for the full year.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In Millions Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1998 1997 1998 1997
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues . . . . . . . . $2,105.7 $1,872.3 $5,849.5 $5,348.1
Cost of revenues . . . . (1,637.8) (1,435.1) (4,546.1) (4,142.4)
Gross earnings. . . . 467.9 437.2 1,303.4 1,205.7
Selling, engineering, admini-
strative and general
expenses. . . . . . . (266.9) (272.3) (797.9) (797.4)
Special charges. . . . . - (9.7) (30.2) (9.7)
Other income (deductions)
Interest expense, net (15.7) (14.5) (44.8) (44.5)
Other, net. . . . . . (.7) (1.4) (5.0) (4.1)
Earnings before items
below. . . . . 184.6 139.3 425.5 350.0
Income taxes . . . . . . (66.6) (48.7) (153.3) (122.5)
Minority interest. . . . (9.2) (9.1) (8.3) (19.1)
Net earnings . . . . $ 108.8 $ 81.5 $ 263.9 $ 208.4
Basic earnings per
common share. . . . . $ .62 $ .47 $ 1.50 $ 1.19
Diluted earnings per
common share. . . . . $ .61 $ .46 $ 1.49 $ 1.18
Cash dividends per
common share. . . . . $ .19 $ .17 $ .57 $ .51
Basic average common shares
outstanding . . . . . 175.8 175.2 175.6 175.8
Diluted average common
shares outstanding. . 176.8 176.1 176.6 176.5
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions)
<TABLE>
<CAPTION>
July 31, October 31,
ASSETS 1998 1997
(Unaudited)
Current Assets
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . $ 117.0 $ 162.8
Notes and accounts receivable, net. . . . . . 1,135.4 1,181.8
Inventories, net. . . . . . . . . . . . . . . 1,040.3 972.3
Deferred income taxes . . . . . . . . . . . . 96.4 96.0
Other current assets. . . . . . . . . . . . . 54.4 58.7
Total Current Assets . . . . . . . . . 2,443.5 2,471.6
Investments in and receivables from
unconsolidated affiliates . . . . . . . . . . 316.3 320.3
Goodwill, net. . . 825.4 803.7
Deferred income taxes. . . . . . . . . . . . . . 182.5 181.7
Other assets . . 194.5 217.8
Property, plant and equipment - at cost. . . . . 2,784.1 2,658.0
Accumulated depreciation and amortization. . . . 1,649.6 1,554.3
Net Property . . . . . . . . . . . . . 1,134.5 1,103.7
Total Assets . . . . . . . . . . . . $5,096.7 $5,098.8
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt . . . . . . . . . . . . . . $ 131.2 $ 48.1
Accounts payable . . . 515.3 566.0
Contract advances . . . . . . . . . . . . . . 213.6 334.6
Accrued compensation and benefits . . . . . . 272.1 253.8
Income taxes. . . . . . . . . . . . . . . . . 98.9 122.1
Other current liabilities . . . . . . . . . . 377.7 362.8
Total Current Liabilities. . . . . . . 1,608.8 1,687.4
Long-term debt . . 759.2 758.0
Employee retirement and postemployment
benefit obligations . . . . . . . . . . . . . 593.2 622.3
Deferred compensation, insurance
reserves and other liabilities. . . . . . . . 150.7 155.2
Minority interest . . . . . . . . . . . . . . . 136.0 143.7
Shareholders' Equity
Common shares . . . . . . . . . . . . . . . . 46.2 46.2
Capital in excess of par value. . . . . . . . 445.2 452.8
Retained earnings . . . . . . . . . . . . . . 1,779.6 1,615.8
Cumulative translation adjustments. . . . . . (146.4) (112.2)
Pension liability adjustment. . . . . . . . . (3.9) (3.9)
2,120.7 1,998.7
Less treasury shares, at cost . . . . . . . . 271.9 266.5
Total Shareholders' Equity . . . . . . 1,848.8 1,732.2
Total Liabilities and
Shareholders' Equity . . . . . . . $5,096.7 $5,098.8
Actual common shares outstanding . . . . . . . . 175.9 175.6
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
<TABLE>
<CAPTION>
Nine Months Ended
July 31,
1998 1997
(Unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net earnings. . . . . . . . . . . . . . . . . $ 263.9 $ 208.4
Adjustments to reconcile net earnings
to cash flow:
Depreciation and amortization. . . . 187.8 191.9
Equity earnings from
unconsolidated affiliates
net of dividends and advances. . . (11.7) (6.2)
Minority interest . . 8.3 19.1
Contract advances. . . . . . . . . . (105.9) (77.7)
Changes in working capital . . . . . (153.0) (231.3)
Other - net. . . . . . . . . . . . . 24.4 (5.4)
Net cash provided by
operating activities . . . . . . . 213.8 98.8
Cash flows from investing activities:
Capital expenditures. . . . . . . . . . . . . (210.2) (186.6)
Business acquisitions . . . . . . . . . . . . (39.2) (3.6)
Proceeds from sale of assets. . . . . . . . . 20.9 127.9
Net cash used by investing
activities . . . . . . . . . . . . . (228.5) (62.3)
Cash flows from financing activities:
Dividends paid. . . . . . . . . . . . . . . . (100.1) (89.6)
Purchases of common shares for
Treasury . . . . . . . . . . . . . . . (39.8) (41.9)
Issuance of common shares . . . . . . . . . . 27.6 17.3
Increase (decrease) in short-term debt. . . . 83.1 (26.9)
Increase (decrease) in long-term debt . . . . 1.2 (2.1)
Net cash used by financing
activities. . . . . . . . . . . . . (28.0) (143.2)
Effect of translation adjustments on
cash . . . . . . . . . . . . . . . . . . . (3.1) 5.4
Net decrease in cash and cash
equivalents . . . . . . . . . . . . . . . . . (45.8) (101.3)
Cash and cash equivalents,
beginning of period . . . . . . . . . . . . . 162.8 232.4
Cash and cash equivalents,
end of period . . . . . . . . . . . . . . . . $ 117.0 $ 131.1
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
(Unaudited)
NOTE A - INFORMATION BY INDUSTRY SEGMENT (IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1998 1997 1998 1997
REVENUES
Petroleum Products and
<S> <C> <C> <C> <C>
Services . . . . . . . $ 673.4 $ 700.0 $2,028.3 $1,947.3
Engineering Services . . 664.1 465.7 1,765.1 1,367.4
Energy Equipment . . . . 773.3 717.2 2,070.5 2,053.7
Eliminations . . . . . . (5.1) (10.6) (14.4) (20.3)
Total revenues . . . . $2,105.7 $1,872.3 $5,849.5 $5,348.1
OPERATING PROFIT
Petroleum Products and
Services . . . . . . . $ 108.5 $ 75.0 $ 304.1 $ 217.2
Engineering Services . . 29.5 24.2 88.6 69.7
Energy Equipment . . . . 84.8 71.8 144.0 164.9
Total segment operating
profit . . . . . . . . 222.8 171.0 536.7 451.8
General corporate expenses (22.5) (17.2) (66.4) (57.3)
Interest expense, net . . (15.7) (14.5) (44.8) (44.5)
Earnings before taxes and
minority interest. .. $ 184.6 $ 139.3 $ 425.5 $ 350.0
</TABLE>
Beginning with the second quarter of 1998, goodwill amortization has been
included as a component of operating profit by segment. Included in the
above operating profit is goodwill amortization as follows:
<TABLE>
<CAPTION>
Petroleum Products and
<S> <C> <C> <C> <C>
Services . . . . . . . . $ 2.2 $ 2.5 $ 6.6 $ 7.7
Engineering Services . . . 2.7 2.7 8.0 8.0
Energy Equipment . . . . . 2.3 2.4 7.3 7.3
$ 7.2 $ 7.6 $21.9 $23.0
</TABLE>
Also included in the Energy Equipment operating profit for the nine months
ended July 31, 1998 are nonrecurring items of $30.2 million. Included in
the Petroleum Products and Services operating profit for the three months
and nine months ended July 31, 1997 are nonrecurring items of $9.7 million.
NOTE B - UNCONSOLIDATED AFFILIATED COMPANIES
The Company has several investments in less than majority owned affiliates.
A summary of the impact of these investments on the condensed consolidated
financial statements follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1998 1997 1998 1997
Share of earnings of
unconsolidated affiliates
Ingersoll-Dresser Pump
<S> <C> <C> <C> <C>
(49% owned) . . . . $ 10.0 $ 7.0 $ 26.0 $ 22.1
Bredero-Shaw
(50% owned) . . . . 16.7 - 46.1 -
Other affiliates . . 3.3 3.1 8.0 7.1
$ 30.0 $ 10.1 $ 80.1 $ 29.2
</TABLE>
<TABLE>
<CAPTION>
July 31, October 31,
1998 1997
Investments in and receivables
from unconsolidated affiliates
Ingersoll-Dresser Pump
<S> <C> <C>
(49% owned) . . . . . .$ 142.5 $ 133.2
Bredero-Shaw
(50% owned) . . . . . . 126.3 139.0
Other affiliates . . . .. 47.5 48.1
$ 316.3 $ 320.3
</TABLE>
NOTE C - INVENTORIES
The determination of inventory values and cost of sales under the LIFO
method for interim financial results is based on management's estimates of
expected year-end inventories.
<TABLE>
Inventories include the following (in millions):
<CAPTION>
July 31, October 31,
1998 1997
Finished products and work in
<S> <C> <C>
process. . . . . . . . . . . . . $ 807.4 $ 783.2
Raw materials and supplies . . . . 232.9 189.1
$1,040.3 $ 972.3
</TABLE>
NOTE D - DIVIDENDS
On August 21, 1998 the Company declared a quarterly dividend of $.19 per
share of common stock payable on September 21, 1998 to shareholders of
record on September 1, 1998.
NOTE E - LITIGATION AND CONTINGENCIES
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. See Note J - Commitments and Contingencies -
in the Company's 1997 Annual Report on Form 10-K for a complete discussion
of these matters. A discussion of significant changes subsequent to
October 31, 1997 follows.
ASBESTOSIS LITIGATION
The Company has approximately 69,600 pending claims at July 31, 1998 with
approximately 9,100 new claims filed and approximately 10,800 claims
resolved during the third quarter of the fiscal year. Certain settlements
previously reported, covering approximately 16,300 claims, are carried as
pending until releases are signed.
Management recognizes the uncertainties of litigation and the possibility
that one or more adverse rulings could materially impact operating results.
However, based upon the nature of and management's understanding of the
facts and circumstances which gave rise to such actions and claims,
management believes that such litigation and claims will be resolved
without material effect on the Company's financial position or results of
operations.
NOTE F - PROPOSED MERGER
On February 26, 1998 the Company and Halliburton Company ("Halliburton")
announced that they had entered into a definitive merger agreement in which
Halliburton N.C., Inc., a wholly-owned subsidiary of Halliburton, will be
merged into the Company with the shareholders of the Company receiving one
newly issued share of Halliburton common stock for each common share of the
Company. The transaction will be accounted for as a pooling of interests
and is expected to be treated as tax-free to shareholders of the Company's
stock.
The proposed merger was approved by the shareholders of both companies on
June 25, 1998. The Company and Halliburton have provided requested
information to the Antitrust Division of the U.S. Department of Justice and
continue to cooperate with regulatory bodies of certain other countries.
On July 6, 1998 the Company and Halliburton received the European
Commission's decision that the Commission will not oppose the merger of the
two companies. On July 9, 1998 the Company received an Advance Ruling
Certificate from the Canadian Bureau of Competition Policy clearing the
merger of the two companies. The two companies expect to complete the
merger by the fall of 1998.
CONSOLIDATED RESULTS OF OPERATIONS - THREE MONTHS AND NINE MONTHS ENDED
JULY 31, 1998 COMPARED TO 1997
Diluted earnings per share for the third quarter of 1998 increased 33
percent to $.61 per share compared to $.46 per share in 1997, which
included a nonrecurring loss of $9.7 million ($6.3 million after tax), or
$.03 per share from the sale of certain assets of the Company's SubSea
business. Revenues for the quarter increased 12 percent to $2.1 billion,
and operating profit improved 30 percent to $222.8 million versus the 1997
quarter. Beginning with the quarter ended April 30, 1998, goodwill
amortization has been included in operating profit and prior period
operating profit has been restated to also include goodwill amortization.
The Company began reporting its interest in the Bredero-Shaw joint venture
under the equity method as of the beginning of this fiscal year. The joint
venture results were fully consolidated in 1997. Adjusting for the effect
of deconsolidating Bredero-Shaw, the Company's revenues for the third
quarter increased 17 percent, and operating profit increased 33 percent for
the quarter.
For the nine months ended July 31, 1998, diluted earnings per share were
$1.49, a 26 percent increase from $1.18 in 1997. The 1998 nine-month
results include nonrecurring charges of $30.2 million ($12.0 million after
tax and minority interest), or $.07 per share incurred in the first
quarter. These charges relate to capacity reductions and other efficiency
measures at the Dresser-Rand and Ingersoll-Dresser Pump joint ventures.
The nine months of 1997 included the loss on the SubSea asset sale.
For the nine months, revenues of $5.8 billion were up 9 percent and
operating profit of $536.7 million was up 19 percent versus last year.
Adjusting for the effect of deconsolidating Bredero-Shaw as noted above,
revenues increased 15 percent and operating profits increased 22 percent
versus the nine months in 1997.
Total backlog of $5.9 billion at July 31, 1998 was up 9 percent from a year
ago. The backlog included $3.9 billion for Engineering Services, $1.6
billion for Energy Equipment and $.4 billion for Petroleum Products and
Services.
INDUSTRY SEGMENT ANALYSIS - THREE MONTHS AND NINE MONTHS ENDED JULY 31,
1998 COMPARED TO 1997
See Note A to Condensed Consolidated Financial Statements for details of
financial information by Industry Segment.
PETROLEUM PRODUCTS AND SERVICES SEGMENT
Third quarter operating profit rose 45 percent to $108.5 million, while
reported revenues of $673.4 million were off 4 percent. For the nine
months, revenues rose 4 percent to $2.03 billion and operating profit rose
40 percent to $304.1 million. Adjusting for the effect of deconsolidating
Bredero-Shaw (see discussion in Consolidated Operations above), revenues
increased 8 percent for the quarter and 20 percent for the nine months,
while operating profit increased 51 percent for the quarter and 49 percent
for the nine months.
Earnings of the drilling and production related businesses improved despite
the global rig count being down 14 percent in the quarter from a year
earlier due to the weakness in oil prices. Baroid Drilling Fluids and
Sperry-Sun had substantial performance gains on a year-to-date basis.
Baroid experienced significant business growth from the high quality of
wells serviced in the Gulf of Mexico and Alaska. Sperry-Sun benefitted
from favorable activity in formation evaluation and directional drilling
product lines.
Excluding the loss on the asset sale in the third quarter of 1997, SubSea's
results for the quarter were down from the prior year on lower volume. For
the nine months, SubSea was significantly ahead of last year as it
benefitted from higher ROV utilization rates and activity levels in the
North Sea and Brazil. Wellstream had significant growth in revenues and
operating profit in both the three months and the nine months. The new
Wellstream facility in the U.K. not only generated business in the North
Sea but also enabled more of the capacity at the Panama City, Florida
facility to be used to meet additional product demand in South America.
The Bredero-Shaw joint venture earnings increased in both the three months
and the nine months with higher activity levels seen in virtually all
markets.
ENGINEERING SERVICES SEGMENT (THE M.W. KELLOGG OPERATIONS)
M. W. Kellogg's operating profit increased 22 percent in the quarter to
$29.5 million from $24.2 million in the prior year. Revenues in the quarter
rose to $664.1 million from $465.7 million in the prior year, a 43 percent
increase. For the nine months, operating profit increased 27 percent to
$88.6 million from $69.7 million last year, and revenues increased 29
percent to $1.8 billion from $1.4 billion last year. The improved results
were attributable mainly to higher activity levels from major LNG projects
in Asia and Africa, an enhanced oil recovery project in Africa and a major
ethylene project in Singapore.
Backlog at July 31, 1998 remained strong at $3.9 billion and was up 22
percent from $3.2 billion at the end of the third quarter of 1997. Backlog
was comprised of 38 percent oil and gas, 29 percent LNG, 25 percent
petrochemicals and 8 percent other.
ENERGY EQUIPMENT SEGMENT
Revenues for the quarter were $773.3 million, up 8 percent from the prior
year. The quarter's operating profit of $84.8 million was up 18 percent
from the prior year. The benefits of the Dresser-Rand and Ingersoll-Dresser
Pump restructuring initiatives begun late last year led to a 34
percent increase in third quarter operating profit for these joint
ventures.
For the nine months, revenues of $2.07 billion were up slightly from 1997.
Nine-month operating profit, including nonrecurring charges, was $144.0
million, down 13 percent from 1997. As noted in the discussion of
consolidated operations, Dresser-Rand and Ingersoll-Dresser Pump incurred
nonrecurring charges of $30.2 million ($12.0 million after tax and minority
interest) in the first quarter of 1998. Excluding nonrecurring charges,
nine-month operating profit was up 6 percent from 1997. Dresser-Rand is
proceeding under its restructuring plan and has incurred approximately
$17.2 million in charges against the restructuring accrual. Costs incurred
relate primarily to employee costs and property costs at its U.K. facility.
Dresser-Rand revenues and earnings for the quarter were up substantially
from last year. Excluding the nonrecurring charges, Dresser-Rand nine-month
earnings were up slightly from 1997 on slightly lower revenues. The impact
of reduced earnings from lower domestic complete unit sales and lower
domestic and European parts sales was offset by lower costs due to the
restructuring initiatives. Excluding the nonrecurring charges, Ingersoll-
Dresser Pump earnings were up significantly from 1997 for the quarter and
the nine months on higher volume.
Wayne revenues and earnings were essentially level with 1997 in the
quarter, but continue substantially ahead of last year for the nine months.
Successful product introductions led to growth in the U.S., Europe and
South America. Energy Valve revenues and earnings were up from 1997 in
both the quarter and nine months as a result of cost improvements, better
product mix and increased volume. Valve and Controls had lower earnings in
the quarter than a year ago essentially due to lower volume. Despite lower
revenues, Valve and Controls' earnings for the nine months were essentially
the same as last year due to improved mix and lower operating costs.
Waukesha's performance improved in the quarter and was slightly up from
last year. Waukesha revenues and earnings are still behind last year on a
year-to-date basis due to unfavorable product mix and aggressive price
discounting by competitors in the first half of the year.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Operating activities generated positive cash flow of $213.8 million during
the nine months ended July 31, 1998 compared with $98.8 million a year ago.
The improvement between years was essentially due to higher earnings and
reduced working capital requirements to fund the current year growth,
partially offset by decreases in contract advances at Dresser-Rand and M.W.
Kellogg. Short-term debt increased $83.1 million during the nine months.
Significant expenditures during the nine months included $210.2 million for
capital expenditures, $100.1 million for dividends, $39.8 million for
common share purchases and $39.2 million for business acquisitions.
Total debt was $890.4 million as of July 31, 1998 compared with $806.1
million at October 31, 1997. Total debt was 33 percent of total book
capitalization as of July 31, 1998 compared with 32 percent as of
October 31, 1997. Net debt to net book capitalization was 29 percent at
July 31, 1998 compared with 27 percent at October 31, 1997.
LEGAL AND ENVIRONMENTAL MATTERS
The Company is currently involved in a number of lawsuits and also has been
identified as a potentially responsible party in a number of Superfund
sites. Note E to Condensed Consolidated Financial Statements includes
significant changes since October 31, 1997.
HALLIBURTON MERGER
The Company's proposed merger with Halliburton was approved by shareholders
and European and Canadian regulatory bodies during the quarter and is
expected to be completed in the fall of 1998.
FORWARD-LOOKING INFORMATION
In accordance with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company notes that the statements in
this Form 10-Q and elsewhere, which are forward-looking and which provide
other than historical information, involve risks and uncertainties that may
impact the Company's results of operations. These forward-looking
statements include, among others, statements concerning the Company's
general business strategies, financing decisions, corporate structure,
backlog, operating trends, industry trends, cost reduction strategies and
their results, expectations for funding capital expenditures and operations
in future periods. The Company also continues to face many risks and
uncertainties including: litigation, environmental laws, operations in high
risk countries, technological and structural changes in the industries
served by the Company, changes in the price of oil and natural gas, changes
in capital spending by customers in the hydrocarbon industry for
exploration, development, production, processing and refining and pipeline
delivery networks. The risks and uncertainties inherent in these forward-
looking statements could cause actual results to differ materially from
those expressed in or implied by these statements.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In connection with the previously announced proposed merger
between the Company and Halliburton Company, the following three
lawsuits have been filed: GRILL V. DRESSER INDUSTRIES, INC. (Del.
Ct. Chancery, C.A. No. 16208), WRIGG V. BRADFORD (Del. Ct.
Chancery, C.A. No. 16209) and GREEN V. DRESSER INDUSTRIES, INC.
(Del. Ct. Chancery, C.A. No. 16222). The Company and its
directors have been named as defendants in these lawsuits filed in
late February and early March in the Delaware Court of Chancery.
The lawsuits each purport to be a class action filed on behalf of
the Company's stockholders and allege that the consideration to be
paid to stockholders in the proposed merger between the Company
and Halliburton Co. is inadequate and does not reflect the true
value of the Company. The complaints also each allege that the
directors of the Company have breached their fiduciary duties in
approving the merger. The GRILL AND GREEN actions further allege
self-dealing on the part of the individual defendants and assert
that the directors are obliged to conduct an auction to assure
that stockholders receive the maximum realizable value for their
shares. All three actions seek preliminary and permanent
injunctive relief as well as damages.
On June 10, 1998 the court issued an order consolidating, under
the caption IN RE DRESSER INDUSTRIES SHAREHOLDER LITIGATION (Del.
Ct. Chancery, Consolidated C.A. No. 16208), the three lawsuits.
The court's June 10, 1998 order requires the plaintiffs to file an
amended consolidated complaint "as soon as practicable." To date,
plaintiffs have not filed an amended complaint.
The Company believes that the lawsuits are without merit and
intends to defend the lawsuits vigorously.
ITEM 2. CHANGES IN SECURITIES
(c) In June 1998, the Company issued 4,760 shares of Common
Stock ($.25 par value) to one officer of the Company in
connection with exercises of stock options. Under the terms
of the Company's 1989 Restricted Incentive Stock Plan
(Plan), one restricted share will be issued for every five
shares of the related stock option exercised. Stock issued
pursuant to the Plan is not registered.
No consideration for the unregistered shares was exchanged.
In issuing the above securities, the Company relied on the
exemption from the registration and prospectus delivery
requirements of the Securities Act of 1933 (the Securities
Act) provided by Section 4 (2) of the Securities Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A Special Meeting of Shareholders of Registrant was held on
June 25, 1998.
(c) At the Special Meeting, the shareholders voted to approve the
Agreement and Plan of Merger, dated as of February 25, 1998,
among the Registrant, Halliburton Company ("Halliburton") and
Halliburton N.C., Inc., a wholly owned subsidiary of
Halliburton, in which the Registrant would become a wholly owned
subsidiary of Halliburton and, among other things, each share of
common stock, par value $.25 per share of the Registrant
outstanding at the effective time of the merger would be
converted into one share of common stock, par value $2.50 per
share, of Halliburton Company.
Votes for 126,248,061
Votes against or withheld 567,498
Abstentions 2,907,798
Broker non-votes -0-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended
July 31, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
DRESSER INDUSTRIES, INC.
By: /s/ Kenneth J. Kotara
Kenneth J. Kotara
Controller
Dated: September 14, 1998
EXHIBIT INDEX
EXHIBIT DESCRIPTION
27 Financial Data Schedule. (Pursuant to Item 601(c)(iv) of
Regulation S-K, the Financial Data Schedule is not deemed to be
"filed" for purposes of Section 11 of the Securities Act of
1933, as amended, or Section 18 of the Securities Exchange Act
of 1934, as amended.)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JUL-31-1998
<CASH> 117,000
<SECURITIES> 0
<RECEIVABLES> 1,135,400
<ALLOWANCES> 0
<INVENTORY> 1,040,300
<CURRENT-ASSETS> 2,443,500
<PP&E> 2,784,100
<DEPRECIATION> 1,649,600
<TOTAL-ASSETS> 5,096,700
<CURRENT-LIABILITIES> 1,608,800
<BONDS> 759,200
0
0
<COMMON> 46,200
<OTHER-SE> 1,802,600
<TOTAL-LIABILITY-AND-EQUITY> 5,096,700
<SALES> 5,769,400
<TOTAL-REVENUES> 5,849,500
<CGS> 4,546,100
<TOTAL-COSTS> 5,344,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,700
<INCOME-PRETAX> 425,300
<INCOME-TAX> 153,100
<INCOME-CONTINUING> 263,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 263,900
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 1.49
</TABLE>
